On Monday, Dr. Reddy’s share price soared to ₹6,424 per share, following a CNBC-TV18 report that revealed the company’s interest in bidding for the majority stake of Novartis AG in its Indian subsidiary, Novartis India.
Dr. Reddy’s has been vocal about its intention to acquire a domestic-focused portfolio, as stated in its recent earnings calls. This is in line with its strategic goal of expanding and consolidating its market presence.
Novartis AG, the Swiss pharma giant, announced a strategic review of its Indian arm, Novartis India, on February 16. This review includes Novartis AG’s 70.68 percent shareholding in Novartis India, indicating a possible change in the ownership structure of the pharma sector.
Dr. Reddy’s has a strong relationship with Novartis India, with notable deals in February and April of 2022. The February deal involved an exclusive sales and distribution agreement for medicines such as the Voveran range, Calcium range, and Methergine. In April, Dr. Reddy’s acquired Novartis India’s Cidmus brand, enhancing its portfolio.
Nomura, a brokerage firm, considers Dr. Reddy’s as the most suitable candidate to buy Novartis AG’s stake in Novartis India, given that Dr. Reddy’s already distributes a significant part of Novartis India’s portfolio (around 50% of sales).
ICICI Direct Research reported that Dr. Reddy’s has expressed interest in buying Novartis India’s domestic-oriented portfolio, possibly offering a premium for the control of the business. Meanwhile, Novartis’s parent company in Switzerland has initiated a strategic evaluation of Novartis India Limited, covering various aspects, including its nearly 71 percent stake in the Indian company. Neither company has confirmed the development. Novartis India’s portfolio under the India brand is estimated to be worth between ₹350 and ₹400 crore.
Dr. Reddy’s has a robust financial position, with a net cash surplus of ₹5,900 crore as of December 31, enabling it to pursue inorganic growth opportunities.
Dr. Reddy’s launched several brands in the domestic market last year and is now focusing on capturing inorganic opportunities as a key driver for its future growth path.
